Data Room: Individual appetite grows

Individuals in the US have increased their exposure to private equity between Q3 2015 and Q3 2016 more than other types of investors.

The private equity aggregate net asset value continues to expand, fuelled largely by increasing dollars coming from US individuals.

According to the third-quarter Private Funds Statistics report released on 24 April by the US Securities and Exchange Commission, the aggregate NAV represented by all registered funds grew by 10.5 percent between the third quarters of 2015 and 2016. At the end of Q3 2015, private equity funds had $1.7 billion in NAV, and reached $1.9 billion in NAV in Q3 2016.

A significant portion of that NAV growth came from US individuals, a category that increased its total assets invested in private equity funds by 20 percent between Q3 2015 and Q3 2016, the report showed.

That rise accounted for the biggest year-on-year growth among the largest categories of investors, which also included government pensions, and sovereign wealth funds, excluding the “other” category that jumped by 30 percent. It was not clear what “other” consisted of.

The fast-growing segment of US individuals could be facilitated by non-traditional private equity platforms, giving retail investors access to the asset class that was historically funded by large institutions.

For example, fintech company iCapital Network, which connects high-net-worth individuals to private equity funds, recently expanded its channel to include accredited investors with a smaller net worth.

“There’s a proliferation of fund managers and product and less interest from the traditional investor base,” placement agent Eaton Partners’ partner Peter Martenson says. “High-net-worth investors have gotten comfortable with private equity and they want access to it.”

He adds there is also a larger magnitude of people becoming affluent, leading him to believe that the presence of individuals in private equity investor base will continue to grow.